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Drawing on its partner network and Red Hat’s open posture, IBM enables full-stack transformation

TBR attended IBM Think in a virtual format for the third consecutive year, and this time around we sensed a new IBM. No longer beholden to its low-margin managed infrastructure services business, IBM is emerging a more agile, streamlined and focused organization, especially as it looks to lead the digital revolution through two overarching areas: getting customers to embrace a hybrid architecture and helping them unlock data-driven insights through AI.

This strategic pivot was driven home not only by high-level executives, including CEO Arvind Krishna himself in an exclusive Q&A session with the analyst community, but also through the various partnership announcements, service launches and upskilling programs unveiled over the course of the interactive, two-day event.

Through Red Hat, Software and Consulting, IBM has created an end-to-end approach to unlocking hybrid cloud’s value

Closing in on the three-year anniversary of its acquisition of Red Hat, IBM (NYSE: IBM) continues to execute on its hybrid cloud vision, offering the services and software needed to integrate and orchestrate enterprise workloads across multiple environments. With the exception of some mono cloud and data center-only customers, enterprises are largely heterogenous in how they consume IT, drawing on multiple architectures, vendors and environments.

Considering IBM’s large legacy software install base and ties to the mainframe, this trend bodes well for the company as it can leverage Red Hat OpenShift — which now has roughly four times the number of customers it had prior to the acquisition — to unlock siloed data and extend it to any public cloud. The challenge, however, as articulated by Roger Premo, general manager, corporate development and strategy, is that getting greenfield applications to the cloud is only Step 1 in achieving a scalable hybrid cloud framework, yet the amount of time, level of skills needed and executive-level pushback are some of the factors that keep enterprises from expanding on their lift-and-shift investments.

 

Hoping to advance customers through the containerization, operational change and replatforming phases of hybrid cloud adoption, IBM is revamping its go-to-market model, closely aligning the Software and Consulting business units to address customer needs end to end. For instance, IBM Consulting is invested in the technology behind IBM’s hybrid cloud and AI vision, providing clients the tools needed to provision their own hybrid environments, which, as phases of adoption become more complicated, will naturally pull in more automation, observability and AI assets, as well as additional advisory assistance to help determine which clouds are best suited to which workloads.

Specifically, Premo highlighted the data fabric, which has grown synonymous with IBM Cloud Pak for Data, as one of the technology pieces underpinning IBM Consulting’s value proposition for building and modernizing applications in a hybrid cloud environment. While IBM is still committed to supporting legacy data warehouses and on-premises databases, the company is likely encouraging customers to adopt the data fabric for integrated capabilities that help simplify data management, such as cataloging and automated governance. Essentially an ecosystem of data powered by active metadata, IBM’s data fabric allows various AI offerings, from decision intelligence to machine learning, to run in any environment, while maintaining a common, governed framework.

IBM’s partner strategy continues to evolve post-Red Hat

IBM has always prided itself on having a broad partner ecosystem but appears to be taking a page out of Red Hat’s playbook by creating a more open position in how it goes to market. For instance, as a full-stack vendor specializing in infrastructure, platform software and professional services, IBM naturally runs up against competition in many areas but appears more willing to risk coopetition to do what is in the best interests of the customer.

TBR notes this is a stark contrast from the SoftLayer days, when IBM seemed more concerned with protecting its direct business interests. Today, Big Blue is absorbing more of Red Hat’s operational best practices and is investing in dedicated teams across the ecosystem, including niche ISVs, hyperscalers, global systems integrators (GSIs), advisory firms and monolithic SaaS companies. At the same time, preserving Red Hat’s independence remains equally important, and as Premo indicates, the relationship between IBM and Red Hat is asymmetrical in that IBM is biased toward Red Hat but Red Hat is not biased toward IBM.

 

IBM inks strategic partner agreement with AWS to scale ‘as a Service’ software

In one of the more newsworthy announcements at IBM Think Digital 2022, IBM unveiled it is working with Amazon Web Services (AWS) (Nasdaq: AMZN) as part of a multiyear agreement that brings the IBM Software portfolio, delivered “as a Service,” to AWS’ cloud infrastructure. Customers can now take advantage of the popular click-to-buy experience on the AWS Marketplace to run IBM data and automation assets, including Db2, API Connect and Watson Orchestrate, among others, in an AWS environment. This partnership announcement is a testament to the major strategy shift IBM made three years ago when it acquired Red Hat and standardized on the OpenShift platform, which, being based on Linux and containers, makes the platform and subsequent IBM software applicable on any infrastructure, including AWS.

This platform approach is also providing IBM the flexibility to adapt alongside changing customer buying habits, including a shift toward cloud managed services, which is the fastest-growing usage of OpenShift and prompted the launch of Red Hat OpenShift on AWS (ROSA) at last year’s Red Hat Summit. Customers looking to offload operations to site reliability engineers (SREs) will be able to deploy IBM SaaS offerings integrated with ROSA as a managed service, although IBM is continuing to support customers looking to protect their capex investments as there are over 30 IBM licensed software offerings available on the AWS Marketplace. Expanding service availability is only one part of the partner agreement as IBM indicates it will work with AWS in other areas, including co-selling and co-marketing initiatives that could engage AWS sales teams and help IBM further tap into AWS’ expansive customer base.

 

Strategically, IBM is staying the course with its strategy, leveraging Red Hat’s neutral status and integrations with hyperscalers to sell more software and attached services. Offering IBM SaaS on AWS is a strategic move as it will allow IBM to address customers that have years of experience running IBM software but want the scale of AWS’ cloud infrastructure, which TBR interprets as IBM prioritizing partner clouds at the expense of its own so it can focus solely on OpenShift and Software. Further, as IBM looks to grow its software business, particularly through the monetization of “as a Service” models built on OpenShift, leveraging partner marketplaces will be key, especially considering IBM lacks marketplace capabilities at scale and IT procurement continues to rally around the digital catalogs of AWS, Microsoft (Nasdaq: MSFT) and Google Cloud (Nasdaq: GOOGL).

 

Use of RISE with SAP internally aligns with IBM’s vision to bring legacy ERP to the hybrid cloud

IBM joined the roster of 1,000-plus RISE with SAP customers, announcing it is migrating to SAP Business Suite 4 HANA (S/4HANA) to streamline business operations across its Software, Infrastructure and Consulting units. This announcement comes just months after IBM unveiled a new supplier option via the BREAKTHROUGH with IBM for RISE with SAP program, which enables customers to bundle professional services with IBM IaaS offerings as part of a unified contract and set of service-level agreements (SLAs).

IBM’s new migration project will leverage the premium supplier option and bring over 375 terabytes of on-premises data to IBM Power on Red Hat Enterprise Linux (RHEL) on IBM Cloud. While IBM is partnering with GSIs in many areas, SAP (NYSE: SAP) implementations is likely one of the areas where competition is fiercer between IBM and its peers, especially as the end-of-life deadline for legacy SAP R3 approaches. However, the premium supplier option paired with IBM’s over 38,000 trained SAP consultants could help the company better tap into SAP’s base of over 30,000 on-premises ERP customers and challenge the likes of Accenture (NYSE: ACN) and Deloitte.



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Instantaneous interconnectivity: Inside the Department of Defense’s ambitious plan for JADC2

What is Joint All-Domain Command and Control?

Joint All-Domain Command and Control (JADC2) is an evolving Department of Defense (DOD) vision to revamp the Command, Control, Communications, Computers, Intelligence, Surveillance, and Reconnaissance (C4ISR) programs currently in use across all U.S. military branches. The infrastructures in place at, for example, the U.S. Army, are largely unable to function at a seamless level with the networks of other branches, such as the U.S. Space Force. Additionally, these infrastructures do not meet the DOD’s requirements to handle rapidly evolving and highly complex new-age battlefield situations that require urgent, coordinated responses from U.S. armed forces.

 

JADC2 is an effort to rectify these dilemmas by creating a cloudlike environment that enables the rapid receipt and transmission of intelligence, surveillance and reconnaissance (ISR) data to interconnected networks. By developing a unified network that enables sensors on Internet of Military Things (IoMT) devices to instantly pass on mission-critical information to leaders, more informed and coordinated decision making is possible across the U.S. military’s branches. Decision makers can act faster and establish more cohesive battlefield tactics, factoring in land, sea and air threats with additional support from each other’s assets due to this common operating picture (COP) being immediately relayed to the relevant parties via machine learning (ML) and AI support.

 

Vendors covered in TBR’s series of Public Sector and Mission Systems reports have been increasingly involved in JADC2. It provides a sizable opportunity for vendors with these areas of expertise.

What will be needed to enable JADC2?

In March, the Pentagon published its official JADC2 strategy, which included five “lines of effort” that the JADC2 Cross-Functional Team (CFT) will work on to bring the DOD’s vision closer to reality. The first goal is to set up a uniform “data enterprise,” which includes creating guidelines for baseline metadata tagging. Next, the JADC2 CFT will leverage digital tools like AI to support decision makers and engage in efforts to advance integral technology. The Space Development Agency (SDA) will then establish a network that enables communication across branches and weave nuclear command, control and communication (N3) systems into the overarching JADC2 program. Lastly, the DOD will strive to better connect mission partners by streamlining the exchange of data.

 

This lofty goal of rapidly parsing relevant data from battlefield situations and enabling decision makers to be more agile will require a lot of support. For example, DevSecOps will build out customizable capabilities for JADC2 based on a department’s needs. The electromagnetic battle management system (EMBM), a core piece of the DOD’s vision, will be underpinned by DevSecOps using electromagnetics that will aid branches of the U.S. military, such as the U.S. Air Force, with tasks like identifying and connecting data. Advancing AI technology will also be critical to JADC2’s success and require contractors to increasingly expand their capabilities.

For example, Booz Allen Hamilton (NYSE: BAH) has been positioning itself to capitalize on AI and analytics demand since 2018 with a series of inorganic and organic investments. TBR anticipates Booz Allen Hamilton will play a key role in helping to produce new tactical support systems leveraging AI and familiarize warfighters with newer technologies like directed energy weapons. Additionally, Peraton Labs has been building out its Operational Spectrum Comprehension, Analytics and Response (OSCAR) solution, which will bolster the DOD’s efforts to bring interoperability across the nation’s military branches by leveraging AI as well as 5G technologies.

 

JADC2 will also require an anti-fragile cloud environment underpinned by 5G technology, which is where military contractors like Lockheed Martin (NYSE: LMT) and Northrop Grumman (NYSE: NOC) have been looking to capitalize. In November 2021 Lockheed Martin formed an alliance with Verizon (NYSE: VZ) to enable interoperability among legacy networks and devices already in use as part of the contractor’s efforts to provide 5G connectivity through its 5G.MIL unified infrastructure. Lockheed Martin has since expanded its partner network to include Keysight Technologies (Nasdaq: KEYS), Microsoft (Nasdaq: MSFT), Intel (Nasdaq: INTC) and Omnispace to assist with 5G.MIL, streamlining network communications for both IP and non-IP users.

Meanwhile Northrop Grumman formed an alliance with AT&T (NYSE: T) in April to analyze digital battle networks and integrate Northrop Grumman’s systems with 5G commercial capabilities and AT&T’s 5G private networks to establish a scalable open architecture for the DOD. To do this at the scale the DOD wants, Lockheed Martin and Northrop Grumman will need to build out their partner networks among startups and fringe players while continuing to build out relationships with major names like Verizon and Microsoft.

 

The military/DOD will increasingly require IT assistance to underpin the JADC2 initiative. While the military’s outsourcing efforts will certainly play a part in bringing JADC2 closer to fruition, the branches are expected to bring on more IT workers of their own and invest in systems integration as well as methods to educate these employees and retain them to help build, maintain and troubleshoot applications.

 

Currently, the military branches are working on their own programs compatible with the DOD’s JADC2 vision. For example, the U.S. Air Force is developing its Advanced Battle Management System (ABMS), which has undergone periodic testing in public since December 2019. Recent efforts indicate the U.S. Air Force is trying to fit KC-46 Pegasus tanker aircraft with pods linking F-22 aircraft and other solutions on the ABMS network, which would allow more information to be exchanged. Meanwhile, the U.S. Navy has been working on Project Overwatch while the U.S. Army has been expanding Project Convergence to include additional features that will contribute to its success. For example, the Army’s FIRESTORM system leverages AI that scans relevant points with sensors, maps out a digital battleground, tags hostiles and selects the optimal weapon for the circumstances.

What are the fears surrounding JADC2?

While JADC2 has a lot of potential, there are several concerns with the DOD’s vision, beyond just getting these systems to communicate through one language.

Security

Fears about JADC2’s adaptability and resiliency are prevalent, particularly because China and other countries have invested in disruptive technologies like an anti-access/area denial (A2/AD) conflict deterrence system that could impede JADC2 and other communication networks’ functions. There has been very little discussion about how JADC2 would combat these disruptions or function in these contested environments outside of test settings when facing the brunt of foreign adversaries’ disruptive technologies. The DOD will need to ensure it can generate as much relevant information as possible from a limited number of sensors while maintaining undetectable networks capable of surviving enemies’ efforts to degrade or disrupt the relaying of information.

Design

Accenture (NYSE: ACN) Federal Services Managing Director Bill Marion also emphasized that human-centered design will be necessary throughout JADC2’s framework to ensure that warfighters and decision makers can easily navigate these interconnected networks and learn about all of their capabilities to maximize their use.

Affordability

Targeted internal investments are necessary to implement JADC2. Companies like Raytheon Intelligence & Space of Raytheon Technologies (NYSE: RTX) will need to develop and connect new IT infrastructure and update legacy systems to ensure they are compatible with JADC2 utilizing a cost-effective approach. Simultaneously, affordable and functioning multilevel cybersecurity solutions that can support the DOD’s desired instantaneous relaying of data and commands will be needed. Currently, there are concerns about enemies being able to hack into the MIL-STD-1553 serial data busses found in IoMT weapon systems. External parties might be able to breach the 1553 data bus and either shut down or actively use these connected armaments on U.S. personnel.

Contractors will need to find ways to protect the 1553 data bus from these threats, and Peraton Labs is already collaborating with military branches to establish Bus Defender capabilities. With the DOD looking to interconnect IT systems across all military branches, TBR anticipates that General Dynamics (NASDAQ: GD) Technologies is aiming to be the DOD’s preferred IT vendor by utilizing Agile methods to expedite the construction of tailored prototypes after first consulting with clients and showcasing the contractor’s base zero-trust solutions.

Ultimately, the journey to JADC2’s implementation will be long and complex. The DOD’s ambitious project will certainly face an ever-shifting road to implementation as there is no true endpoint for the project. Key components like hardware will need to be updated, policies will be amended, and the scope of JADC2 will grow, especially as the U.S. eyes getting allies involved with JADC2 in the future to establish a more unified cloudlike environment capable of streamlining the transference of data to all nations. If all goes well, the U.S. will be able to truly integrate its military branches, allowing them to overwhelm adversaries by using mission-critical data to make better, more informed and coordinated tactical decisions. The U.S. will aim to control the next-generation battlefield by gaining the upper hand on intelligence and rapid communication.


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Big Blue and big government: Enhancing security and co-innovation operations improves IBM’s chances in the U.S. public sector

IBM is strengthening public sector resources in the U.S. to capture modernization opportunities

While the public sector accounts for less than 10% of IBM’s revenue, in TBR’s estimates, IBM is expanding resources in the U.S. to ramp up activities. IBM developed its delivery capabilities for the U.S. federal sector by establishing the IBM Center for Government Cybersecurity in June. The center, part of IBM’s offices in downtown Washington, D.C., will have a secure laboratory space for government clients to jointly develop solutions around advanced security threats leveraging IBM technologies and services. The center will provide access to IBM experts and external advisers, such as former government officials, as well as host workshops around topics such as zero-trust frameworks and cloud security. Clients will also have access to the IBM Research labs to collaborate on encryption solutions. ​

In October IBM opened a new IBM Garage location in Huntsville, Ala., a location designed specifically to support the federal government’s digital transformation and modernization. IBM is enhancing its value proposition by offering government-grade cloud environments, cleared local resources trained on IBM Garage principles and methodology, and thought leaders that will provide services in a hybrid model. In a similar move, Accenture Federal Services opened an innovation space at the University of Alabama in Huntsville’s Invention to Innovation Center in June. Such activities indicate a potential war for talent, especially for industry and technology experts skilled at working with public sector clients.​

A partnership with Raytheon, formed in October, expands IBM’s reach in the aerospace, defense and intelligence, and federal government sectors. IBM and Raytheon will jointly develop AI, cryptographic and quantum solutions. Raytheon is one of several federal aerospace and defense (A&D) contractors teaming with IBM Services to launch MARQTS (Marketplace for Advanced, Rapid, Quantifiably-assured, Trusted Semiconductors), a hybrid cloud-based and blockchain-enabled forum to support the secure development of microelectronics for the commercial industry and the DOD. IBM joins A&D and commercial IT companies Boeing, Cadence, Colvin Run Networks, Intrinsix, Lockheed Martin, Marvell Government Solutions, Nimbis Services Inc., Northrop Grumman and PDF Solutions. MARQTS will be available to the U.S. defense sector by 2023. IBM will use a proprietary cloud platform developed to enable secure collaboration for the group, while the platform will reside on an IBM blockchain to enhance security. IBM expects to roll out MARQTS across the DOD by 2023.

According to TBR’s 2Q21 Public Sector IT Services Benchmark, “The appetite for digital modernization by agencies of the U.S. federal government remains strong, as evidenced not only by record revenue and backlog levels reported by many federal technology contractors in 2Q21 but also by the robust level and velocity of proposal submissions tendered by federal IT vendors. Commercial technology adoption is red hot in federal IT, particularly around cloud computing, where TBR observed a significant uptick in efforts by multiple contractors during 2Q21 to shore up collaborations with the leading commercial cloud leaders.”

Senior Analyst John Caucis, who leads TBR’s Public Sector IT Services research, notes, “The federal civilian sector has recovered vigorously from the COVID-19 trough a year ago, thanks to civilian agencies’ ongoing drive to digitize their IT infrastructures. Cyber budgets are also growing, reflecting federal agencies’ strong will to secure their data and IT systems from the ever-growing barrage of cyber threats. AI is increasingly permeating security, intelligence gathering and analysis, the burgeoning space sector, and citizen services, cementing AI as a critical technology to drive mission success and driving AI leaders like Booz Allen Hamilton to accelerate the time to market of new AI technologies.”

The content above draws heavily from TBR’s most recent quarterly analysis of IBM’s services business. Contact the author at [email protected] for additional insight and information. 

With Nuance, Microsoft buys into healthcare and more

Microsoft announced its second largest acquisition in company history on April 12 with its intent to purchase Nuance Communications for $19.7 billion. Nuance’s presence in the healthcare vertical was touted as driving the move, but TBR believes much deeper and broader strategies were behind Microsoft’s decision.

Buying Nuance gives Microsoft an opportunity, but not a guarantee, to sustain growth

The announced acquisition of Nuance is the culmination of multiple elements of Microsoft’s recent performance, strategy and growth plans. On performance, Microsoft has benefitted from the COVID-19 pandemic perhaps more than any other technology vendor. Technology demands of businesses and consumers reacting to the pandemic boosted nearly all of Microsoft’s sprawling businesses, aside from an initial downturn in advertising spend that negativly impacted the LinkedIn business. From a strategy perspective, industry specialization has been a growing focus for Microsoft over the past five years, which is a shift in its mostly horizontal technology approach throughout its long history. Healthcare has been a frequent focus, but so too have retail, manufacturing and financial services specialization.

Lastly, in growth, Microsoft has been searching for the next $10 billion plus growth business. Microsoft Office 365 and Azure are clearly carrying Microsoft’s financial performance to date, but new addressable markets are needed to carry corporate growth and profitability for the next decade. While Nuance itself cannot assume that burden, the capabilities Microsoft will acquire will make many of its core technologies relevant to a much wider audience and set of use cases. In this way, the purchase of Nuance is similar to that of LinkedIn, with the full value of the investment hinging on successfully leveraging the technology to benefit as many other business units as possible.

Healthcare is large and ripe for IT investment

Unsurprisingly, healthcare has a profound impact on modern society, with an industry size to reflect that. In the U.S. alone, healthcare spending was $3.8 trillion in 2019, representing 17.7% of total gross domestic product (GDP). Furthermore, healthcare spending increased by 4.6% in 2019, a rate far outpacing growth of the overall economy.

Those facts are only part of the reason healthcare is such an attractive market for IT companies. While many verticals have fully embraced technology-driven transformation over the past decade, healthcare has been much slower to change. While technology has fundamentally changed the retail experience and business model, healthcare’s core operations and customer experience have remained much the same. Delaying this maturity in part are the strict regulations, such as the Health Insurance Portability and Accountability Act (HIPAA), which healthcare entities in the U.S. must meet, creating substantial risk for any IT budget decision makers planning to modernize their environments with cloud, let alone pursue innovative technologies such as IoT to improve the care they provide to patients.

There are glimmers of promise that the healthcare vertical is ready to begin transformations driven by increased technology adoption. Part of the shift is a generational change in doctors and providers. The influence that doctors have within the healthcare industry is one of the attributes that makes the healthcare vertical unique. Generational change among the physician ranks is having an outsized impact on the acceptance of technology within healthcare, but that is only one of the factors pointing to an increase in technology adoption.

Outside of shifting perception, the impact of COVID-19 has forced hospitals and patients alike to embrace solutions that have been around for years but are now a necessity to maintaining the patient-doctor relationship and safety, such as telemedicine. And with all major cloud technology providers offering HIPAA compliance, along with an ecosystem of partners that can leverage those delivery platforms, the aforementioned regulatory requirements are now less of a barrier in slow technology adoption.

Cloud vendors go deep with industry solutions

Google Cloud and SAP are flagship examples of vendors building vertically oriented strategies with the introduction of industry cloud solutions

Over the last year, as more organizations accelerated the migration to the cloud, it has become evident that a horizontal cloud does not always meet the specific needs of certain industries, especially highly regulated ones such as banking or healthcare. In response to the increasing complexity of certain industries and the regulations that they are governed by, along with the overall uptick in cloud adoption during the era of COVID-19, cloud vendors are investing in the development of clouds that cater to industry-specific nuances and the demands of safely distanced or remote work. The narrowing of focus is part of broader strategic objectives that extend beyond just the immediate commercialization of opportunity and revenue impact.

Initiatives by SAP and Google highlight how innovation and technological advancements in AI and machine learning (ML) factor into the evolution of industry clouds. With recent rollouts and announcements, both vendors have highlighted the importance of creating new types of data-driven cloud solutions powered by AI and ML, augmented by networks of customers and partners. While SAP and Google currently participate in fruitful partnerships together, it will be interesting to watch the common goal of delivering vertical-specific capabilities to their customers unfold to see whether the two companies align or compete in this new chapter of cloud defined by industry.

Google leads with innovation in ML and AI to augment, rather than replace, legacy solutions

In February Google Cloud CEO Thomas Kurian emphasized that Google Cloud’s top priority is to develop a new generation of applications, which will be able to extract data from traditional line-of-business (LOB) applications such as those used for CRM and use technologies like AI and ML to optimize outcomes. Kurian reinforced the strategy of veering away from the development of traditional enterprise applications in favor of industry-specific apps that are designed to extract data from these traditional applications.

Leading up to 2020, the migration timelines for the 80% of companies that had not yet made the move to the cloud rested on comfortably planned milestones that indicated an evolution versus an urgent call to change. Looking back over the last six months, organizations suddenly found themselves in the thick of the impetus to migrate to the cloud and to do so quickly. Even organizations whose cloud journeys were well underway prior to the COVID-19 outbreak are narrowing their strategies and turning to clouds that cater to the specific requirements and compliance standards that industries, especially those that are highly regulated, including the government, require. As a result, a number of leading cloud vendors such as IBM (NYSE: IBM), Google (Nasdaq: GOOGL) and SAP (NYSE: SAP) have recently made strides in building out and refining their cloud strategies to cater to the specific requirements and demands of certain industries.  

NVIDIA acquires ARM: Creating a next-generation AI platform

NVIDIA announced Sept. 14 an agreement to acquire ARM holdings from SoftBank for $40 billion, subject to regulatory approval in the U.S., the U.K., the European Union and China. The acquisition has been rumored for several weeks, but the announcement generated negative comments from ARM customers. The two companies’ IP portfolios complement each other, especially in the context of rapidly growing AI workloads. TBR believes the combined company can successfully create new integrated AI hardware platforms, while growing profitable in each former company’s primary business, graphics processors for NVIDIA and mobile CPUs for ARM.

Complementary IP and different business models

ARM is in the CPU business. NVIDIA is in the graphics processing unit (GPU) business, and NVIDIA GPUs are increasingly used in non-graphics AI processing applications. Both companies rely on microprocessor design to deliver value and grow their businesses, but the way each company monetizes its IP is very different. NVIDIA is a traditional product-based business; it makes processors and boards that it sells to equipment manufacturers and to cloud service providers. ARM follows a licensing model; it sells the rights to use its designs and instruction sets to equipment manufacturers that often modify the ARM designs to meet their needs.

One concern of current ARM customers is that NVIDIA will eventually move ARM to a product model; only NVIDIA will make hardware that incorporates ARM designs, shutting off customers’ ability to customize ARM-based chips. This would be a disaster for the major mobile OEMS, including industry behemoths Apple and Samsung. ARM chips power virtually all smartphones and tablets, and mobile vendors rely on derivative ARM designs for differentiated products. Apple makes its own modifications and recently announced that its PCs will be migrated from Intel to ARM processors, allowing the company to have a uniform hardware platform for all its major products. Samsung designs its own ARM processors but relies on third-party ARM designer Qualcomm for many of its products. To make matters more confusing, Samsung manufactures both Qualcomm and Apple processors.

NVIDIA announced that it would continue the current ARM licensing business model and, in fact, would license some of its GPU IP in the same manner. Nevertheless, ARM customers are concerned because strategically vital licensed IP would now be owned by a hardware vendor. TBR believes the ARM licensing model will continue for ARM designs and the same model will greatly benefit NVIDIA’s GPU business as well.

NVIDIA is transitioning from graphics to AI

NVIDIA is the dominant vendor in GPUs, and for that reason, if its processors were used only for graphics, its growth would be limited to the growth of graphics applications. GPUs, however, are also well-suited for AI deep learning applications because both graphics and deep learning rely on massively parallel processing.

2Q20 is a crossover quarter. For the first time, NVIDIA data center revenue, which is almost all AI, was greater than revenue from graphics applications in PCs. NVIDIA data center revenue grew 167% year-to-year; NVIDIA will soon be dominated by AI applications in data centers. There is competition in AI processors from Google’s tensor processing unit (TPU) and from field-programmable gate arrays (FPGAs), as well as several new AI processing entrants, including two from Intel. Nevertheless, NVIDIA enjoys an enormous lead in a very rapidly growing business.

GPUs and CPUs working together

GPUs and CPUs coexist. Every device that uses GPUs for AI needs CPUs for all the other required processing. In data centers, the CPU is now almost always an Intel product. While ARM designs are increasingly powerful, as illustrated by Apple’s decision to use them for PCs, they are not yet used widely for data center devices. Where the GPU is doing most of the work, however, ARM-NVIDIA designs could be quite viable. ARM-NVIDIA designs would also work well in edge devices. This synergy positions NVIDIA well in a world where deep learning is becoming increasingly important.

Applications for deep learning are becoming more diverse, creating a variety of settings and requirements for CPU-GPU platforms. This proliferation of design requirements is a challenge for a product-based company like NVIDIA. The ARM licensing business model fits this diversifying market very well. TBR believes NVIDIA will first experiment with the licensing of older GPU designs, but then move rapidly to licensing GPU IP for all AI applications, greatly accelerating adoption of NVIDIA designs for AI and inhibiting growth of competing AI chip designs.

The ARM acquisition will accelerate AI

While NVIDIA and ARM are not competitors, therefore reducing anti-trust concerns, many parties have expressed concerns about this acquisition. Both companies are very important, with NVIDIA dominating AI processors and ARM monopolizing mobile CPUs. There are also concerns about a U.S. company controlling these two critical components. In the U.K., there is concern about the loss of jobs. TBR, however, believes this union will prove beneficial, certainly to the combined company, but also to other companies basing their business on the growth of AI.

Atos gains AI consulting expertise through the Miner & Kasch acquisition to enable digital transformations

Miner & Kasch’s deep AI expertise in North America helps Atos extend global reach and scale

According to Atos SVP of Big Data & Security Jerome Sandrini, Miner & Kasch’s appeal included raw talent — “pure data scientists, real PhDs, not citizen data scientists” — and reusable components, particularly assets that will work with Atos’ Edge servers. Listening to Miner & Kasch co-founder Niels Kasch walk through several use cases, TBR understood both of Sandrini’s points, as the technical expertise was matched with examples of applying distinct approaches and solutions across multiple industries. Sandrini also noted Atos’ commitment to ensuring Miner & Kasch is integrated fully into the larger Atos but not diluted, retaining its agility and culture. Miner & Kasch resources were merged with resources gained from the zData acquisition in 2017. The Miner & Kasch acquisition accelerates Atos’ Data Science as a Service offering and improves the company’s ability to deploy edge and next-generation data science platforms for industry solutions.

Since the beginning of 2019, Atos has been following a bolt-on acquisitions approach to gain capabilities and intellectual property and support its expansion in areas with growth potential. In 2019 Atos made two purchases with 100 employees each, IDnomic in identity and access management and X-perion Consulting in energy and utilities consulting. In 2020 Atos announced six acquisitions, three in the U.S. and three in France, ranging from 50 to 800 employees, targeting new areas of expansion for Atos and offering small-scale capabilities with IP: Maven Wave (U.S.) in Google Cloud; Miner & Kasch (U.S.) in AI and data science; Paladion (U.S.) in AI-driven cybersecurity and risk analytics; AliA Consulting (France) for SAP S/4 HANA; EcoAct (France) in decarbonization; and digital.security (France) in cybersecurity services.

In April Atos announced the acquisition of Maryland-based data analytics consulting boutique Miner & Kasch, folding it into Atos’ zData business group to create a team of more than 100 AI consultants. TBR spoke with Miner & Kasch co-founders Donald Miner and Niels Kasch, zData CEO Dan Feldhusen, and Atos SVP of Big Data & Security Jerome Sandrini about Atos’ strategy behind the acquisition and expectations for the zData business group heading into 2021.

Vendors enhance core competencies with strategic purchases and AI investment to address IT challenges in the analytics services market

All vendors tracked in TBR’s Digital Transformation: Analytics Professional Services Benchmark except Oracle expanded their analytics services revenue in 1Q20, albeit at a slower pace from the previous year, highlighting that optimizing IT operations — through the use of analytics — is becoming table stakes for buyers.

Accenture took over the No. 1 spot from IBM Services in revenue size in 1Q20, something TBR saw coming a couple of years ago. In TBR’s 1Q18 A&I Professional Services Benchmark, we wrote, “In 1Q14, when TBR launched the inaugural edition of this benchmark, Accenture’s quarterly A&I services revenue was just over half the volume of IBM’s. In 1Q18 Accenture was nearly 85% of IBM’s size in overall A&I services revenue, surpassing Big Blue in three service lines and one region. Though IBM made significant strides to reshape its services organization over the last four years, those efforts came too late to protect its market share.”

1Q20 Estimated Analytics Professional Services Revenue, Profitability and Year-to-year Revenue Growth

TBR’s Digital Transformation: Analytics Professional Services Benchmark addresses changes in leading digital transformation vendors’ strategies and performances as well as their investments and go-to-market positions as it relates to the ever-evolving analytics services market. The report includes use cases and analysis of IT services’ and consultancies’ management of technology partnerships as well as highlights region-specific market trends to benchmark key service line, regional and operational data across 20 leading analytics services vendors.

COVID-19 causes analytics services market to pause, allowing vendors to prove the true value of analytics and better train their AI models

COVID-19 causes analytics services market to pause, allowing vendors to prove the true value of analytics and better train their AI models

All vendors tracked in TBR’s Digital Transformation: Analytics Professional Services Benchmark except Oracle expanded their analytics services revenue in 1Q20, albeit at a slower pace from the previous year, highlighting that optimizing IT operations — through the use of analytics — is becoming table stakes for buyers.

Accenture took over the No. 1 spot from IBM Services in revenue size in 1Q20, something TBR saw coming a couple of years ago. In TBR’s 1Q18 A&I Professional Services Benchmark, we wrote, “In 1Q14, when TBR launched the inaugural edition of this benchmark, Accenture’s quarterly A&I services revenue was just over half the volume of IBM’s. In 1Q18 Accenture was nearly 85% of IBM’s size in overall A&I services revenue, surpassing Big Blue in three service lines and one region. Though IBM made significant strides to reshape its services organization over the last four years, those efforts came too late to protect its market share.”

TBR’s Digital Transformation: Analytics Professional Services Benchmark addresses changes in leading digital transformation vendors’ strategies and performances as well as their investments and go-to-market positions as it relates to the ever-evolving analytics services market. The report includes use cases and analysis of IT services’ and consultancies’ management of technology partnerships as well as highlights region-specific market trends to benchmark key service line, regional and operational data across 20 leading analytics services vendors.

COVID-19’s societal pressures kick up a Digital Dust Bowl

Evolving business activity and social interaction have been on a collision course with dated public policy best practices for decades

Three years ago, TBR put out a report called The impending Digital Dust Bowl: Mitigation, survival and interdependence, in which we evaluated the social, economic and political arenas and examined how the pivot to digital business and social interactions was disrupting society. In the interim, we have discussed what seems to be transpiring as a societal rebirth, arguing that while there would be pain involved as a normal component of bringing about new life, the end result would be a better world because of what the technology industry can enable the world to do. Big changes are on the cusp of commercialization as blockchain ensures data accuracy, machine learning addresses new queries, and quantum provides the compute horsepower needed to tackle the world’s most intractable problems.

Three years ago, in discussing AI’s impact, the historical comparison we settled on was the Great Depression, fueled by manufacturing automation, which appeared to be a reasonable analogy. Henry Ford launched his first assembly line in 1913; Watson beat a human on “Jeopardy!” in 2011. These were the comparative touchstones.

At this juncture, we may view that historical comparison as a best-case example and may find mechanization in the early to mid-1800s as a more appropriate parallel. The mid-1800s radically transformed agrarian economies, and that disruptive impact spurred the revolutions of 1848 in Europe and was a contributing economic factor to the U.S. Civil War.

Few conversations today are held without discussing the implications of COVID-19 on our daily lives. Technologists and other pundits talk of the accelerating trends the pandemic triggers. Whether social, business or political trends as we know them, COVID-19 has certainly quickened the rate at which those trends are being felt by virtually everyone around the globe. It is a unique time and highlights the need for career technologists to step forward and participate heavily in the dialogues occurring throughout society on how to remediate the dysfunctional aspects of modern life on which COVID-19 has shined a very bright light.